The riskiest money-market mutual funds will be required to abandon their stable, $1-share value and allow their prices to float under rules adopted by the U.S. Securities and Exchange Commission.

The rules, approved today on a 3-2 vote, conclude a four-year struggle to toughen regulations after a run at one money fund during the 2008 credit crisis brought the $2.6 trillion industry to near-collapse, halted only by a federal backstop. Money-fund managers and other business groups largely opposed the new rules.

The strongest of the measures are reserved for prime money funds, which cater to institutional investors and primarily buy riskier securities, such as commercial paper issued by banks. Instead of a stable price of $1, which means a dollar invested can always be redeemed for $1, prime funds will have to price their shares in a way that will reveal fluctuations. Funds will have two years to comply with the change.

“Today’s reforms will fundamentally change the way that most money-market funds operate,” SEC Chair Mary Jo White said before the vote. “They will reduce the risk of runs in money-market funds and provide important new tools that will help further protect investors and the financial system in a crisis.”

White and Commissioners Luis A. Aguilar, a Democrat, and Daniel M. Gallagher, a Republican, voted for the rules. Republican Commissioner Michael S. Piwowar and Democratic Commissioner Kara M. Stein opposed them.

The rules include an agreement with the Treasury Department and Internal Revenue Service to reduce the tax burden from investing in a fund whose share price can change. Investors will only have to account for gains and losses once, at the end of a year, instead of tracking prices at which they buy or sell throughout a year. The IRS also will waive its “wash-sale” rule, which could have penalized investors who frequently move cash in and out of money funds.

Retail investors won’t see changes in how their shares are priced. Funds that primarily invest in government and municipal securities are largely exempt from the new requirements.

The rules will be closely examined by money-fund managers such as Federated Investors Inc., which argued that a floating share price wouldn’t prevent investor flight in a crisis.

The SEC has sought to calibrate the rules so that money funds remain a useful alternative to bank deposits. Gallagher said the final rules averted earlier proposals, backed by the Federal Reserve, to require that funds hold a capital buffer.

“Addressing a three-decade-old error in a nuanced and tailored manner to reinstate market-based pricing should not be seen, as some have argued, as a heavy handed act of government,” Gallagher said in a statement. “This is especially true when the fix will positively impact investor behavior and eliminate the perception of a federal backstop.”

Regulatory uncertainty about MMFs has played a large part in the reduction of corporate cash invested in them. Since 2007, corporate cash and short-term investment holdings in MMFs have fallen from 31 percent to 16 percent, according to the 2012 AFP Liquidity Survey.

But further complaints to follow

AFP has long opposed an overhaul of money market funds, as it could greatly reduce investors’ interest in utilizing them as a cash management and investment tool. Jeff Glenzer, CTP, AFP's vice president and chief operating officer, commented that "while AFP is pleased with the two-year phase-in of the new MMF rules finally voted on by the SEC, we remain extremely concerned about the future of MMFs as a viable cash management tool, given the imposition of the floating NAV and fees and gates."

Some business groups such as the U.S. Chamber of Commerce have complained that the changes will destroy the appeal of prime funds, which corporations use to manage cash. The move to a floating share price also will require corporate investors to pay taxes on gains and losses, making them more complex to use, the Chamber of Commerce said.

Some funds have previously threatened to sue to block the changes. None have declared they actually do this yet. But there is plenty of time in the two year transition period before the ruling is implemented.